Marketplace Episode Summary: "Tariff Pain and Retaliation"

Release Date: March 5, 2025 | Host: Kai Ryssdal

Introduction

In the March 5, 2025 episode of Marketplace, host Kai Ryssdal delves into the escalating tensions of international trade, focusing on the current wave of tariffs and their widespread repercussions. The episode navigates through various industries and regions affected by these economic policies, offering listeners a comprehensive understanding of the complexities involved in today’s trade environment.

Tariffs and Trade Retaliation

[01:15] Kai Ryssdal sets the stage by addressing the pressing question: Are we in a trade war? He confirms, emphasizing that retaliatory tariffs have already been implemented, citing specific figures:

"Yes, 25% on Canada, 25% on Mexico, another 10% on China on top of the 10% already imposed retaliatory tariffs because this is the way things go in a trade war have already started." [01:15]

Ryssdal outlines the sectors targeted by these tariffs:

• Canada: Alcohol, clothing, and appliances.
• China: Agricultural products such as chicken and wheat.
• Mexico: Specific items yet to be determined.

He underscores the dynamic and ever-changing nature of trade policies, highlighting the immediate impact on business owners navigating this uncertain landscape.

Impact on Businesses: Avocado Imports

Kristen Schwab of Marketplace investigates the direct effects on businesses caught in the crossfire of tariffs. She interviews Paul Weissman, an avocado importer at Healthy Avocado, who discusses the compounded challenges faced even before the imposition of tariffs:

[02:24] Paul Weissman states:

"The industry has been a little touch and go lately. Even before tariffs, supply from Mexico has been down because of bad weather." [02:24]

Weissman reveals that avocado prices have doubled compared to the previous year, impacting sales and consumer affordability. The uncertainty leads Weissman to question:

"Will consumers pay three or four dollars each for an avocado?" [02:39]

The dependency on Mexico as the primary supplier of avocados exacerbates the situation, leaving Weissman waiting to see how tariffs will further influence prices and whether farmers will adjust production accordingly.

Broader Economic Impacts and Uncertainty

Erica York from the Tax Foundation provides insight into the broader economic implications of tariffs beyond immediate costs:

[02:52] Kai Ryssdal prompts:

"I don't think [consumers] will." [02:52]

[03:14] Erica York remarks:

"That itself has a negative impact on business investment, on business activity." [03:14]

York emphasizes that the uncertainty surrounding trade policies can deter long-term business investments. Kristen Schwab adds that even the potential reversal of tariffs won't instantly restore previously established business relationships, creating prolonged friction for companies operating across borders.

Regional Effects: Texas and the Warehouse Market

The episode shifts focus to Texas, a state heavily integrated with Mexico’s economy, where the impact of tariffs is markedly pronounced. Elizabeth Troval reports on the substantial trade relationship Texas maintains with Mexico, valued at approximately $300 billion.

[05:12] Erica York explains the local effects:

"New tariffs could raise the price of what Texans eat and drink." [05:12]

Key industries affected include:

• Alcohol and Produce: Increased costs for beer, liquor, and agricultural products.
• Construction Materials: Higher prices for lumber and drywall sourced from Canada and Mexico, impacting homebuilding costs.
• Energy Sector: Oil producers face higher costs for essential equipment components from Canada and Mexico.
• Trucking Industry: Increased costs and reduced demand for semi-trucks, affecting logistics hubs like Laredo.

The episode highlights a significant vacancy rate disparity in the warehouse market, with smaller warehouses (under 100,000 square feet) experiencing lower vacancy rates compared to larger counterparts. Liz Young from Wall Street Journal discusses how the shortage of small warehouses hampers retailers like Half Price Books, forcing them to seek temporary storage solutions or downsize their operations.

Walgreens and the Retail Pharmacy Industry

In a notable segment, Samantha Fields explores the struggles of major pharmacy chains amid the economic strain of tariffs and declining profits. Walgreens, a nearly century-old publicly traded company, is reportedly in talks to be taken private by Sycamore for around $10 billion, reflecting its decade-long challenges.

[07:15] Fields observes:

"Walking into a big pharmacy these days can be kind of depressing. Empty shelves, locked up products, long lines to pick up prescriptions." [07:15]

Key factors contributing to the decline include:

• Reduced Prescription Reimbursement: Lower profitability from prescription fills due to consolidation among pharmacy benefit managers (PBMs).
• Eroded Customer Experience: Declining in-store services leading to decreased foot traffic and sales.
• Competitive Pressures: Increased competition from online delivery services and alternative retail options.

The downward spiral is encapsulated in the cycle where diminished customer traffic leads to lower revenues, which in turn hampers investments in improving the customer experience, thereby further deterring consumers.

Current Supply Chain and Warehousing Challenges

Liz Young's analysis in the Wall Street Journal sheds light on the ongoing issues in the warehousing sector. The overall vacancy rate for U.S. warehouses was reported at 6.7%, with a stark contrast between smaller (<100,000 sq. ft.) and larger warehouses (≥100,000 sq. ft.), standing at 3.9% and 10.1% respectively.

[13:06] Young explains:

"A lot of these properties, when they're smaller, are closer to cities. So they might be in urban areas themselves, they might be in suburban areas, and that means space is tight and land is expensive." [13:06]

The surge in demand for smaller warehouse spaces is attributed to companies seeking more flexible and localized storage solutions amidst economic uncertainties. Retailers like Half Price Books struggle to secure adequate warehouse space, leading to reliance on temporary storage or internal inventory management adjustments.

Forest Service Layoffs and Community Impact

A poignant segment covers the layoffs within the Forest Service, highlighting the human and community side of economic policies. Emily Kocharski narrates the story of Forest Service workers in McCall, Idaho, who have been laid off despite their critical roles in maintaining public lands and ensuring safety during fire seasons.

[21:01] Kocharski shares her experience:

"I want to find a job. I'm going to pass out my resume and tell people what has happened to me and ask for help." [21:01]

The layoffs have spurred protests, with community members emphasizing the vital role these workers play:

[22:17] Kristen Schwab states:

"Our neighbors, our friends, our kids, soccer coaches, our federal employees. Employees. And without their income, our community doesn't have money coming into it." [22:17]

The reduction in workforce threatens the Forest Service’s ability to manage wildfires and maintain forest health, raising concerns about environmental and safety implications for local communities.

Soccer Business Highlight: Eleven Shoe Brand

Shifting gears, Ben Shahebar introduces Eleven, a new soccer shoe brand aiming to break into a market long dominated by giants like Nike and Adidas. Shahebar shares the challenges of transitioning from digital design to physical product manufacturing, emphasizing the importance of quality and attention to detail.

[24:58] Shahebar reflects:

"When we got our first samples back, you know, the shape of the shoe was wrong, a lot of those construction details were wrong. And I remember being like, can I actually do this?" [24:58]

The brand plans a summer launch to capitalize on the growing soccer participation in the U.S., leveraging in-person demos at tournaments leading up to the 2026 World Cup.

Market Closing and Financial Updates

Towards the episode’s conclusion, Ryssdal provides a financial roundup:

• Stock Market: Dow Industrials dropped by 1.5% to 42,005 points; NASDAQ slipped slightly; S&P 500 saw a 1.2% decline.
• Retail Impact: Best Buy’s shares fell over 13% following lower-than-expected outlooks tied to tariff-induced price increases. Target also saw a 3% drop as it announced potential in-store price hikes to mitigate tariff impacts.
• Bond Market: Yields on ten-year Treasury notes rose to 4.25%, indicating shifting investor sentiments amidst economic uncertainties.

Conclusion

The "Tariff Pain and Retaliation" episode of Marketplace paints a comprehensive picture of the multifaceted impact of tariffs on the U.S. economy. From agricultural imports and regional industries to major retail chains and public sector employees, the ripple effects of trade policies are far-reaching. Through insightful interviews and detailed reporting, Kai Ryssdal and the Marketplace team provide listeners with a nuanced understanding of the ongoing trade dynamics and their implications for businesses and communities across the nation.

Notable Quotes:

• Kai Ryssdal [01:15]: "Yes, 25% on Canada, 25% on Mexico, another 10% on China on top of the 10% already imposed retaliatory tariffs because this is the way things go in a trade war have already started."

• Paul Weissman [02:24]: "The industry has been a little touch and go lately. Even before tariffs, supply from Mexico has been down because of bad weather."

• Erica York [03:14]: "That itself has a negative impact on business investment, on business activity."

• Kristen Schwab [22:17]: "Our neighbors, our friends, our kids, soccer coaches, our federal employees. Employees. And without their income, our community doesn't have money coming into it."

• Ben Shahebar [24:58]: "When we got our first samples back, you know, the shape of the shoe was wrong, a lot of those construction details were wrong. And I remember being like, can I actually do this?"

This summary aims to encapsulate the essence of the episode, providing listeners with a thorough overview of the discussions surrounding tariffs and their widespread economic and social impacts.